UK updates rules for 800 MHz and 2.6 GHz auctions

Following its initial consultation,  Ofcom recently issued its assessment of future mobile competition and revised proposals for the auction of 800 MHz and 2.6 GHz spectrum in the UK.

Ofcom has significantly revised its proposals set out in its first consultation, and the auction has disappointingly (although not unexpectedly) slipped to Q4 2012 at the earliest, with a strong likelihood (based on past performance by Ofcom) of the auction being delayed until 2013 – putting the UK well behind many of its global peers in mobile broadband.

The first significant change is a redesign of the auction process and rules which will now not guarantee than either Everything Everywhere or a fourth market participant will obtain sub-1GHz spectrum. Ofcom has reached this conclusion on the basis that the advantages of sub-1GHz spectrum are not sufficiently large to require regulatory intervention to ensure that all market participants have access to such spectrum.

The second, less controversial, change is the removal of 2 x 5MHz blocks from the 800 MHz auction, on the basis that this block is too small to be useful and may therefore end-up being under-used.

The new proposals comprise:

Safeguard caps

The revised proposed safeguard caps are:

  • an overall spectrum cap of 2 x 105 MHz; and
  • a sub-1GHz spectrum cap of 2 x 27.5 MHz.

These caps will cover all the spectrum in the auction (i.e. the 800 MHz and 2.6 GHz bands) and existing mobile spectrum holdings (i.e. holdings at 900 MHz, 1800 MHz and 2.1 GHz, excluding the 2.1 GHz unpaired spectrum).

Reservation of Spectrum for 4th market participant

Ofcom is still of the view that they need to ensure that enough spectrum is available for a 4th market participant and are proposing that a medium portfolio (as opposed to minimal portfolio) will be reserved for that purpose.

Reservation of spectrum for sub-national Wi-Max operator?

Although Ofcom are studiously technology neutral they are also considering reserving 2 x 10MHz of spectrum in the 2.6 GHz band (suitable for Wi-Max) for an operator that is not one of the four national market participants.

One 800 MHz award to include roll-out obligation linked to mobile infrastructure programme

Ofcom has updated its prior proposal (to include an objective mobile broadband coverage obligation) in one of the 800 MHz licences to a more relative (and stretching)  obligation to provide a 4G mobile broadband service with coverage comparable to the 2G mobile voice coverage delivered by todays 2G mobile networks (in combination) plus the extended mobile voice coverage achieved as a result of the government’s mobile infrastructure programme that is funding the roll-out of additional rural and not-spot coverage, to the extent that the MIP infrastructure is capable of supporting 4G network equipment.

Next Steps

Responses are due by 22 March, with the final rules published in the summer (always dangerous when a government body picks a season, rather than a month) and the award expected in Q4 2012.

EE Auction of 1800 MHz

It is also worth flagging that as a result of undertakings given at the time that DT and FT merged their UK mobile operators Orange and T-Mobile, recent press reports have indicated that the merged Everything Everywhere entity they will be running a private auction of UK 1800MHz spectrum.

 

UK first European country to permit use of white space spectrum

On 1 September 2011, Ofcom published a statement outlining its intention to permit the use of white space spectrum in some of the the bands currently used for TV (470-790 MHz). Ofcom’s policy will be implemented through a statutory instrument which will make relevant devices licence exempt. This is in contrast to the approach of auctioning licences for adjacent 800 MHz spectrum being adopted by Ofcom for digital dividend spectrum.

Ofcom confirmed its prior intention to use geolocation databases (rather than alternative approaches such as sensing or beacons) to prevent harmful interference and that it intends to allow competition to develop between database providers, rather than mandate or licence a single database provider. It will now work to develop a set of minimum standards to be met by database providers who wish to become accredited and identify appropriate mechanisms to ensure that database providers are able to gain access to the required data.

With the UK ‘front-running’ on this issue in Europe there are currently no applicable harmonised European technical standards that can be referred to for the purposes of the licence exemption so Ofcom proposes to reference ‘Interface Requirements’ that will initially in turn reference a voluntary national standard, with an expectation that this will be superseded by applicable European standards when available.

Ofcom’s hope is that use of this spectrum will significantly increase the availability of mobile broadband – no doubt inspired by reports from the US, and continues to monitor closely the trial being run in Cambridge to inform its detailed implementation.

European Commission tries to marshal stakeholders for World Radiocommunications Conference 2012

The European Commission published on 6 April a Communication on policy objectives for the International Telecommunications Union World Radiocommunications Conference 2012 (WRC 12). WRC 12 is the next quadrennial meeting of governments and other stakeholders to coordinate international spectrum policy and to update the Radio Regulations.

In marked contrast to many Commission documents, the Communication shows the Commission’s nervousness at Europe’s negotiating position in a forum where each Member State is (at least in theory) separately represented.  Although the European Conference of Postal and Telecommunications Administrations (CEPT) develops European Common Proposals, CEPT has more of a technical harmonisation focus than the Digital Agenda policy of the Commission and its members are wider than members of the European Union.

In preparation for the Communication, the Commission asked the Radio Spectrum Policy Group (RSPG), which represents the Member States, to provide an Opinion on policy issues likely to be in play at WRC12. That Opinion identified a number of policy areas, which the Commission has addressed in its Communication. In summary these areas (by reference to WRC12 agenda numbering) are:

  • Digital Dividend 790-861 MHz (1.17):  the aim is for balanced coexistence between EU-wide wireless broadband and diminishing use of aeronautical radionavigation systems on the EU’s Eastern border. Obligations to protect digital broadcasting should remain in force, but no further obligations added.
  • Galileo 1283.5-2500 Mhz and 5000-5030 MHz (1.4/1.18): ensure Galileo has frequencies it needs to operate without harmful interference.
  • Single European Air Traffic Control 960-116 MHz 5091- 5150 MHz (1.4/1.7):  ensure Europe can develop and implement the best system.
  • Communications Satellites 21.4-22 GHz (1.7/1.13/1.25/7): oppose any division into national assignments and protect air traffic management objectives.
  • Unmanned Aerial Systems 5000-5030 MHz (1.3): protect Galileo.
  • Software Defined Radio and Cognitive Radio (1.2/1.19): work towards more flexible approach, but no change to Radio Regulations.
  • Short Range Devices (1.22): resist any additional constraints.
  • Scientific Research and Climate Change 275-3000 GHz, 22.5-23.15 GHz, 37 GHz, 3-50 MHz (1.6/1.11/1.12/1.16/1.24/1.15): promote new allocations and protect scientific services in relevant bands.
  • Tuning Ranges for Electronic News Gathering (1.5):  No change to Radio Regulations, but de facto harmonisation through Recommendation.

So far as the agenda for WRC16 is concerned, the Commission suggests that the debate on mobile broadband should not be restricted to particular bands.

The Communications concludes with a wish from the Commission that the role of the EU is bolstered in the ITU – in part no doubt to avoid the rather messy preparation process being followed. The next steps will be for the European Parliament and Council to consider the Commission’s Communication.

UK to auction 800 MHz and 2.6 GHz spectrum in 2012

Ofcom yesterday started a consultation on the rules for a proposed auction of 250 MHz  of spectrum in the 800 MHz (aka ‘digital dividend’) band and 2.6 GHz band in the first half of 2012. This is equivalent to 75% of existing mobile spectrum.

Whilst widely reported in the press as a ‘4G’ auction, apart from a proposed requirement in one of the 800 MHz lots of a 95% mobile broadband service obligation, there is no proposed technical use restriction or obligation to roll out LTE contained within Ofcom’s proposals.

Readers will recall the Watcher’s worry when Government published the Direction to Ofcom to carry out these auctions that the process was open to delay by means of litigation. Nothing in yesterday’s consultation allays that fear – if parties were to want to delay the auction there is  sufficient material within the proposals to mount an arguable challenge. However, this seems to me to be a very high stakes real-life example of the prisoner’s dilemma, and I can only hope that the real gains to be made by all parties (and the UK) from not delaying the auction will outweigh the potential relative advantages that could be gained by challenges by individual players.

For those who are interested, the legal constraints upon Ofcom are helpfully set out in Section 3 of the consultation, from which I would highlight Article 9 of the Framework Directive, which requires that:

‘spectrum allocation … based on objective, transparent, non-discriminatory and proportionate criteria.’

The consultation covers a number of areas, which are summarised below.

Mobile competition assessment

The first substantive section of the Consultation considers the state of competition in the UK mobile market, then goes on to consider what actions should be taken in the context of the auction to promote competition. Building on Ofcom’s December 2009 Mobile Sector Assessment, Ofcom conclude that an open auction would risk future competition, particularly at the wholesale level, and therefore propose two measures:

  • floors which are designed to ensure that at least four bidders will obtain a sufficient amount of spectrum to be able to operate as (at least) a credible national wholesale mobile network; and
  • safeguard caps designed to ensure that no one operator can obtain significantly more spectrum than their competitors. The proposed caps being consulted on are 2 x 27.5 MHz of sub-1GHz spectrum and 2x 105 MHz of mobile spectrum in total.

How to secure adequate mobile coverage

Ofcom want to ensure that there is a minimum coverage level, but feel that it is not proportionate to include coverage obligations in all licences. They are therefore proposing that only one 800 MHz lot will have a coverage obligation – no doubt that obligation will be reflected in a lower auction price. The proposed coverage obligation will be to:

  • deploy an electronic communications network that is capable of providing mobile electronic communications services;
  • with a sustained downlink speed or not less than 2MBits/s;
  • with a 90% probability of indoor reception; and
  • to an area within which at least 95% of the UK’s population lives.

For those with long memories, this proposal directly picks up on one of the previous Government’s Digital Britain proposals.

Design of combined award

Ofcom propose a combinatorial clock auction with generic lots for bidders to aggregate, so I predict plenty of work for the various economics consultancies on auction strategy.

Generic lots will comprise:

  • various categories of 2 x 5 MHz lots in 800 MHz band;
  • a single category of 2 x 10 MHz lots in 2.6 GHz band for individual high power use; and
  • a potential category for low-power use by concurrent licensees in 2.6GHz band.

Licence conditions

Ofcom will consult separately on technical licence conditions. So far as non-technical conditions are concerned they propose that the licences will:

  • be UK wide;
  • be technology and service neutral;
  • permit spectrum trading;
  • be of indefinite duration, with very limited powers for Ofcom to revoke during the first twenty years; and
  • contain an obligation on licensees to provide Ofcom with usage information.

Setting existing 900 and 1800 MHz fees post-auction

Ofcom propose to use the auction prices as the basis for revised fees for existing 900 and 1800 MHz licences.

Next steps

The consultation closes on 31 May 2011, and Ofcom will hold a series of meetings and workshops whilst the consultation is open. In parallel, Ofcom plan to publish proposals which will deal with protection of adjacent DTT spectrum and on the technical conditions relating to the auctioned spectrum.

Ofcom expect to reach a decision in the autumn and to proceed to auction as soon as possible thereafter – likely in 2012.

AT&T and T-Mobile USA merger to face regulatory scrutiny

The biggest news this weekend was the announcement of the proposed acquisition of T-Mobile USA by AT&T from Deutsche Telekom for $39 billion. The deal is conditional on regulatory approval, and I’ll be watching with interest as the other US mobile networks seek to gain advantage through the regulatory process.

AT&T is the second largest US network and T-Mobile USA the fourth. AT&T’s announcement emphasises the positive aspects of the merger, saying that the merger:

  • Enhances network capacity, output and quality in near term for both companies’ customers
  • AT&T commits to expand 4G LTE deployment to an additional 46.5 million Americans, including in rural, smaller communities, for a total of 294 million or 95% of the U.S. population
  • Provides 4G LTE service for T-Mobile USA’s 34 million subscribers
  • More than $8 billion in incremental infrastructure spend by a U.S. company over seven years, enabling nation’s high-tech industry, innovation and economic growth
  • Creates substantial value for AT&T shareholders through large, straightforward synergies

However, based on the experience of other markets (cf creation of Everything Everywhere by the merger of Orange and T-Mobile in the UK) their competitors will likely argue that the deal reduces competition and that the combined entity should divest some of its spectrum. I’ll follow the debate with interest.

A quick look forward to tomorrow’s post – the UK’s Competition Appeal Tribunal hands down judgment in the PPC Appeal at 9 am tomorrow. Among the issues the judgment is expected to address is how a SMP cost-orientation obligation is to be applied in practice.

Uncertainty for UK spectrum auctions as refarming permitted

Ofcom permits 2G spectrum refarming

Ofcom yesterday varied the spectrum licences of the UK’s three 2G spectrum licensees (EverythingEverywhere (JV between Orange and T-Mobile), Vodafone and O2) to permit them to use those frequencies for 3G services (mobile broadband) as well as 2G services (such as voice and SMS). 

For more detail see the Olswang update (thanks to Telecommentator).

Uncertainty about digital dividend and WiMax auctions remain

However, uncertainty still remains over the timetable, process and scope for challenge in relation to the proposed UK auctions for the digital dividend (800 MHz) and WiMax (2.6 GHz) spectrum.  The December 2010 Directions to Ofcom, which came into force on 30 December 2010 merely direct Ofcom to carry out a competition assessment (s8 of the Directions) and to auction 800 MHz and 2.6 GHz spectrum (s9 of the Directions).

Those who have been following the saga for some time, may be getting an eerie deja vu feeling right now, and I am reminded of the TV series Dallas where one season turned out to have been a dream.  When Ofcom originally tried to auction the 2.6 GHz spectrum it became bogged down in litigation, and pursuant to the Digital Britain initiative of the last government, the Independent Spectrum Broker identified proposals that could form the basis of detailed direction to Ofcom, thereby limiting the scope of Ofcom’s discretion and (the hope went), limiting the scope for challenging the exercise of that discretion.   We are now back to Ofcom having extensive discretion in terms of the auction process.  Stetson anyone?

Broadband aid (do they know it’s Christmas)

Re-reading yesterday’s post, I hope it wasn’t too close to a law firm client update – that is not being the point of this blog. I thought I’d try to redress the balance today, and as I drove from London to Exmoor for Christmas, with the snow by the side of the road steadily increasing, I once again found inspiration in 1980s music. It being that time of the year, the radio was playing back-to-back Christmas songs. Hearing Band Aid again reminded me both how if the cause is good enough how a bad song can become a hit as well as the importance of wireless to bridge the digital divide in the developing world.

Whilst the connection may not be immediately obvious, the macro-economic benefits of a connected society seem as important over the long-run as helping with short-term crises. It is clear that for many developing countries they have leap-frogged wired voice to mobile voice. Without a copper (or other fixed network in situ) that can be repurposed for some variant of DSL, then some type of wireless solution is likely to be answer for enabling broadband connectivity.

As with many industry debates, the proponents of LTE and WiMax will each tell you about the respective benefits of their technology without necessarily highlighting that the two approaches are more similar than might be supposed. It is a shame that there is not more common ground, but the availability of spectrum for wireless (but not necessarily mobile) broadband is a common shared interest.

However, the signs are encouraging. Governments do seem to get the point and even over the last year more and more spectrum is being made available. With investment into both developing countries and infrastructure increasing, my Christmas wish is that we will see an increasingly connected world.

Key telecoms regulatory issues for 2011 (do too many connectives watch star trek?)

With my first post done, I thought it best to try and provide a little substantive content.  Two years ago, I spent some time interviewing various CEOs, strategy and regulatory directors in various international communications companies to get their thoughts on the big issues that were coming up.  With the end of the year approaching it seemed like an opportune time to revisit that research and reflect on whether those issues were still current, and therefore worth continuing to follow.

At the time of the research, our over-riding thesis was that the telecoms industry was going undergoing structural changes that meant that regulatory structures well-suited to dealing with steady-state markets were being overwhelmed by the changes confronting them.  The market and regulatory result was likely to be similar to that experienced when other step-changes (competition, mobile telephony, broadband, etc) impacted on the market – confusion and delay.  Events over the past two years (even putting aside the small matter of the global financial crisis) would appear to have validated that idea.

The themes identified in 2008 were:

  1. Consumers, rather than the market players, were the long-term winners.  Amongst the market players, returns to the incumbents’ shareholders were better than the new market entrants.
  2. Next generation access (that is, high-speed fibre based last mile connectivity to the home or business) would be the defining issue for the telecoms industry globally.  Regulators however did not know how to approach the issue.
  3. The tension between the pipes and the poetry (telecoms infrastructure v content and services provided over that infrastructure) was starting to surface – and in particular how the costs of network upgrades would be financed.  Net neutrality had not at that stage really crossed the Atlantic, but the industry could see the way the winds were blowing.
  4. Spectrum availability,  in particular as an enabler of ubiquitous ‘current speed’ broadband, was identified as a critical factor issue to resolve, even before the iPhone and iPad.

Looking back, those themes still as relevant today as they were in 2008, so I will return to them in future posts.

Finally, the star trek reference of the title has got nothing to do with trying to spoof search engines, but in the real world it does strike me that we need less ‘next-generation’ ideas and more plain English action plans to actually make things happen.